Understanding the Different Types of SaaS Business from A Buyer’s Perspective
As estimated by card payment integrator Card Connect, as of June 2020, there is roughly 15,529 software as a service company globally. Every single one of those businesses is one-of-a-kind. As you may think, this implies SaaS is a very large and diverse business sector.
If you intend to buy or sell any SaaS businesses, you need at least a general grasp of the types of SaaS businesses that exist and what sort of software each might generate.
Therein lays the dilemma, however. Were we to fully list every single form of application one could possibly encounter, this paper could charitably be termed encyclopedic.
Instead, it serves our goals considerably better to classify things into broad categories.
Increasing Productivity through Effective Management
Productivity management software is exactly what it sounds like. It’s designed to help the user more efficiently and successfully execute their work.
From simple checklists to sophisticated journaling and task tracking software powered by artificial intelligence, there are many options available for this.
This category could potentially include systems for managing projects.
As observed by Grand View Research, although the market for productivity management apps dropped marginally owing to the pandemic, the forecast moving ahead is bright.
Currently, the global productivity management software industry is estimated at $42.6 billion. Machine learning and artificial intelligence are projected to play a big role in this growth between now and 2028.
Examples of Productivity Management SaaS Apps
Communication & Collaboration
Wordstream, an online advertising firm, says that during the pandemic, the use of digital communication and collaboration tools skyrocketed. Distributed work is here to stay, even if demand for these tools declines after the pandemic is over.
The hybrid offices, which will become the standard moving ahead, will need the availability of virtual communication and meeting technologies as in-office teams coordinate and cooperate with remote staff.
Unsurprisingly, this area has the potential to earn enormous revenue. It’s important to keep in mind that the market is extremely competitive, and you may have to contend with the likes of Microsoft Teams and Slack.
Examples of Communication & Collaboration SaaS Apps
Most B2B apps in the collaboration and productivity space are generalist solutions. As a result, they are applicable to a wide range of business types and don’t target a single industry or niche market. This is not the case for SaaS solutions that are industry-specific.
These are extremely purpose-built tools conceived and developed with the specific demands of a single sector in mind. In one sense, this severely restricts the pool of prospective users for an app.
On the other, because businesses in this category usually engage with rigorous regulatory and security norms, they tend to run at larger margins than other SaaS organizations.
As a consumer, I’d recommend avoiding this highly-niche programme unless you possess the requisite expertise to deal with it.
Examples of SaaS Applications with A Narrow Focus
The similarities between horizontal and vertical apps are numerous. They’re created with a certain use case in mind, delivering minimal value to anyone that doesn’t match their unique niche. Where the two apps differ is that horizontal apps are broadly applicable across many sectors.
To put it another way, they’re built to address business demands that are industry-agnostic. Customer relationship management (CRM), human resources (HR), accounting, and payments to customers are a few examples of these disciplines.
Collaboration/project management applications might possibly feasibly fit under this category, depending on how they are built and promoted.
Examples of Horizontal SaaS Apps
Business to Consumer (B2C) (B2C)
Up to this point, our attention has mostly been on business users. Consumer software, on the other hand, makes up a sizeable share of the SaaS business. It’s also vital to recognize that there are numerous fundamental differences between B2C and business-to-business (B2B) (B2B).
B2B users are more analytical when it comes to selecting and acquiring software, while B2C clients prefer to make purchase decisions more anchored in emotion.
B2B software tends to operate at better margins than B2C software, but correspondingly, B2B apps tend to be more demanding to administer.
B2B users frequently have a strong concept of what they’re seeking or their business needs. The needs of B2C customers, on the other hand, are frequently hazier.
Entertainment or enjoyment is frequently the fundamental purpose of a B2C audience. Business-to-business (B2B) customers are more difficult to reach.
People are increasingly using B2C services like video streaming and gaming to keep themselves entertained during the lockdown that has ensued since the outbreak of the epidemic. As such, a digital entertainment SaaS business might be an exceedingly solid acquisition.
Examples of B2C SaaS apps
League of Legends
Mix and Match
Here’s when things get a bit more tricky.
A single SaaS app might fit into one or more of the categories above. You might find a collaborative app designed particularly for the healthcare sector, for instance, or a human resources software meant for use by legal firms. This is hardly a terrible thing.
Per VentureBeat, the more narrow a SaaS business’s specialization, the more effective it tends to scale. This is because specialty apps may readily embrace industry best practices and adapt to market fluctuations.
They can also be significantly customized to a business’s particular criteria while adopting a low-touch approach to sales.
There are practically endless categories and kinds of SaaS apps. It’s crucial that you learn to distinguish them and comprehend whether or not they appeal to you as a customer.
Even if a SaaS firm appears wonderful on paper, you may lack the requisite expertise or knowledge to manage it efficiently – and the right business in the wrong hands can be just as much of a lemon as a failing business.
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